Arbitration of employee claims-better safe than sorry

It has been my experience that employers facing an employee lawsuit, fare much better in arbitration rather than in the courts before a jury.  Oftentimes, Plaintiff;s counsel will enflame the jury by presenting irrelevant but damning facts that may not even have anything to do with the employees complaint.  Because of this, I recommend to al my clients that they include a mandatory arbitration provision in all their employment contracts and/or in their handbooks containing the company's rules and regulations (including the arbitration provision) and have the employee sign a document indicating he has read the handbook, is aware of its contents and agrees to abide by its provisions.

These types of mandatory arbitration provisions are usually enforced by the courts provided they afford the employee access to a forum for arbitration (meaning the employer agrees to pay all arbitration fees), and are specific in how the arbitration will be handled.

In a recent decision of the fourth appellate division, the Appellate Court invalidated the mandatory provision finding it to be procedurally and substantively unconscionable.  It is important to know that the offending portions of the arbitration provision the could found to be unenforceable in this case, can be corrected now so that the next employee complaint you receive gets arbitrated rather than tried before a jury.

In Carbajal v. CWPSC, Inc. (CA4/3 G050438 2/26/16) ,  Defendant and appellant CWPSC, Inc. (CW Painting) appealed the trial court’s order denying its motion to compel its former employee, plaintiff and respondent Martha Carbajal, to arbitrate her wage and hour claims under the arbitration provision in her employment agreement.  The trial court denied the motion because it found the arbitration provision was both procedurally and substantively unconscionable.  The Appellate Court agreed with the trial court.

 The arbitration provision was found to be procedurally unconscionable because it was a part of an adhesion contract CW Painting imposed on Carbajal as a term of her employment.  Further, although the arbitration provision required the parties to arbitrate their disputes under the American Arbitration Association’s (AAA) rules, the provision did not identify which of AAA’s many different rules would apply, CW Painting failed to provide Carbajal with a copy of the rules it believed applied, and CW Painting required Carbajal to sign the agreement without telling her where she could find the governing rules or giving her an opportunity to determine which rules would apply. 

The arbitration provision was found also to be substantively unconscionable because it allowed CW Painting to obtain injunctive relief in court while requiring Carbajal to seek relief through arbitration, it waived the statutory requirement that CW Painting post a bond or undertaking to obtain injunctive relief, and it effectively waived Carbajal’s statutory right to recover her attorney fees if she prevails on her Labor Code claims.

CW Painting’s asserted that the trial court was required to sever these unconscionable terms and enforce the remainder of the arbitration provision.  The Court of Appeal found that a trial court has discretion to deny enforcement of an arbitration agreement when the existence of multiple unconscionable terms permeates the entire agreement.  The Court found the facts supported the trial court’s exercise of its discretion.

 Finally, the Court rejected CW Painting’s contention that the Federal Arbitration Act (9 U.S.C. § 1 et seq.; FAA) governed the action.  The trial court and the court of appeal found otherwise.  Both courts found that the party asserting the FAA controlled bore the burden to show it applies by presenting evidence establishing the contract with the arbitration provision has a substantial relationship to interstate commerce, and CW Painting failed to timely present such evidence.

The moral of this story is that mandatory arbitration of employee claims can be enforced provided the provision relied upon contained all the necessary safeguard.  If you have not had an attorney review the wording of your arbitration provision recently, you should do so.  An inflamed jury is very likely to side with the employee and assess not only damages but also punitive damages as well.  It is much better to be safe rather than sorry.

Wage Orders Apply To MTA Employers

Flowers v. LA County Metro. Transp. Auth. (CA2/2 B256744, filed 11/25/15, pub. Ord. 12/17/15) Application of Wage Order to MTA Employees

This appeal concerns overlapping provisions of the Labor Code, the Public Utilities Code (PUC), and an Industrial Welfare Commission (IWC) wage order governing the wages, hours, and working conditions of transit operators employed by the Los Angeles Metropolitan Transportation Authority (MTA).  The issues presented are (1) whether PUC sections 30257 and 30750 exempt the MTA from minimum wage and rest period requirements imposed by the Labor Code and by IWC Order No. 9-2001 (Cal. Code Regs., tit. 8, § 11090) (wage order 9), and (2) if the MTA is subject to the provisions of wage order 9, whether the terms of the wage order itself exempt MTA transit operators from the rest period requirements.

  The Appellate Court held that PUC sections 30257 and 30750 do not exempt the MTA from rest period and minimum wage requirements, but that the rest period requirements do not apply to the MTA operators who are the putative plaintiffs in this action.

 

http://www.courts.ca.gov/opinions/documents/B256744.PDF

COMMON SENSE WAYS TO AVOID EMPLOYEE CLAIMS

Every employer believes he is fair to all his employees and that not one of his employees would ever become disgruntled and pursue a legal action against him.  WAKE UP.  That is the exception rather than the rule.  The reality facing employers is that there is a distinct possibility that even long term employees will become disgruntled and ultimately pursue a legal action based upon either a real or perceived wrong committed by the employer.  Recognizing this fact and preparing in advance for its possible occurrence can literally be the difference in winning the employee lawsuit when it ultimately comes or losing that lawsuit.  The following simple procedures are easy to implement, will actually promote fairness towards every employee, while providing the employer a basis of defending and defeating a merit less wrongful discharge lawsuit brought by a disgruntled employee.

AT-WILL EMPLOYEE STATUS 

  • The California Labor Code provides generally that an employment having no specified term may be terminated at the will of either party on notice to the other. 
    • Employment Application 
      • An express disclaimer in an employment application form that employment is at-will can limit the exposure of an employer to a later claim by an employee that he or she accepted employment in reliance on an implied agreement that termination would occur only for cause. The Application should state that “the terms cannot be altered except by some specified and highly-placed company representative. 
    • Handbooks and Policy Manuals: 
      • A well-drafted employee handbook serves many useful purposes. It can help to (1) create and promote a desired image or corporate culture (2) improve employee morale by acquainting the employees with their benefits and other aspects of employment that make the company a desirable place to work (3) reduce employer-employee disputes by giving notice of uniform employment guidelines and policies (especially those concerning equal employment opportunity and employee discipline and discharge) (4) limit the possibility of union organizing and (5) persuade an opposing counsel, judge or jury in a wrongful discharge case that the employer has followed a coherent employee relations philosophy. 
      • Limitation: All handbooks should include a disclaimer “its contents were under no circumstances to be construed as describing conditions of employment or as creating or constituting a contract.” 
    • Grievance Clauses: Many employers have responded to the emergence of wrongful discharge law by adopting some type of formal or informal internal dispute resolution procedure as an attempt to assure their employees an opportunity to voice their concerns before such concerns lead to litigation.  
    • WAIVER OF JURY TRIAL:  Every employee should be given an employment agreement that restates the "At Will" relationship and also includes a waiver of a trial by jury and provides for mandatory arbitration.  Juries historically favor the employee so removing the threat of an erroneous and very large judgment in favor of the employee is a major step in protecting the company from a terminated or disgruntled employee. 
      • Informal: “Open Door Policy”
      • Series of steps in the resolution process with ultimate appeal to a line manager, a disinterested manager or a high level authority or a committee composed of employees and managers. The committee should only be given the authority to offer a resolution to the problem.
        • Filing a written complaint to designated representative.
      • Precondition to litigation is non-binding mediation.
      • MANDATORY BINDING ARBITRATION:  Your handbook and your employee employment contract should contain a provision providing for binding arbitration 
      • Note: Requiring employees to exhaust available grievance and arbitration remedies serves the policy of providing a quick, relatively inexpensive alternative to court litigation. 
    • Discipline and Discharge Clauses: Employers should adopt a discipline or discharge policy. However, if an employer adopts a discipline policy, it must  scrupulously follow the terms of that policy. Enforcement of rules and the assessment of discipline should be exercised consistently. Document everything. By creating its own discipline and discharge policy, an employer should be able to determine for itself the standard by which it will deal with its employees, escaping the imposition of some other standard by a court or jury, and will also provide a written basis to monitor the consistent administration of discipline. 
      • Progressive Discipline: The effective application of progressive discipline prohibits employees from asserting later that they were not warned that their conduct could lead to discharge, helps assure consistency by formalizing guidelines for the administration of discipline, and demonstrates the employer’s wish to act reasonable and in good faith with its employees. 
  • Step One: Oral Counseling (documentation to file)
  • Written Warning (which should always be signed by the employee)
  • Probation or Suspension
  •  Termination 
  • Exceptions: Progressive Discipline policies would not apply to offenses that are clearly inappropriate and require immediate termination such as on-site drug use, violent conduct, theft etc. 
        • Disclaimer: The policy should also include an express reservation of management discretion in administering the policy. 
      • Salary Increases / Performance Review: It is difficult to prove to a jury that a discharge was for a good reason if there is no documentation of poor performance or if the employee’s personnel file contains only documents relating to salary increases or other indications of satisfactory performance. Do not make it a habit to simply tell the employee he is doing a good job and reward him with a raise.  Make sure you discuss and document the employees' deficiencies, and if necessary give him a lessor raise than planned because of the deficiencies.  
      • Performance Evaluation: An effective performance evaluation procedure is an important step toward limiting potential liability for wrongful discharge and discipline. Where improvement is indicated, a plan and timetable for improvement should be specified by the manager.  Again an honest written evaluation of the employees' performance and stated improvement goals goes a long way towards disproving an alleged unlawful discharge.  Of course, have the employee sign the written evaluation and provide him with a copy. 
        • Note: standardizing review criteria and educating managers to formally and regularly review their employees performance reduces the potential for arbitrary treatment or differential standards in discharge and discipline. 
      • Exit Interviews: Employers should  conduct exit interviews with all  terminating employees, in order to make a written record of the stated reasons for leaving.  This will prevent a disgruntled employee from changing his story down the road and filing a wrongful termination lawsuit.  An exit  interview also has the side benefit of allowing the employer to obtain important information on how well the employer’s employee relations policies are being implemented. 
      • Pre-Termination Interview With Employee:  Speaking with and documenting what the employee is upset about and why he is quitting, prior to making any decision on termination, provides the employer the opportunity to gather data while the issue is current without the employee thinking his employment might be jeopardized.  Usually the employer is better able to identify the real problem facing the employee when the interview is conducted in this manner. 
      • Requesting Employee To Resign Than Be Terminated:  Oftentimes a disgruntled employee who has committed an offense that will lead to his termination would rather be allowed to resign rather than be formally terminated.  This allows the employee to tell future employers that he resigned form his last employment and avoid the stigma that goes with a termination when looking for new employment.  Additionally, an employee who willfully resigns will be hard pressed to fashion a viable wrongful discharge lawsuit down the road. 
      • Prohibit Immediate Supervisors From Terminating Employees 
        • For instances involving insubordination and other offensive conduct, allow the immediate supervisor to suspend the employee pending investigation by a higher-level manager. 
      • Review Discharge By Attorney: If in doubt about a wrongful termination, always seek legal advise before terminating an employee. 
        • Discharges of employees who are in a protected class, or who otherwise present litigation risks, should be reviewed by an attorney as well. 
      • In-House Investigation 
        • The individual responsible for reviewing the discharge should speak with all persons who have knowledge of the relevant facts and circumstances. He or she should take detailed notes and consider obtaining signed statements if witness later may be unavailable or may be hostile to the company’s position. 
      • Red Flags 
        • Employee is long term
        • Member of racial or ethic minority
        • A woman in a job traditionally dominated by men
        • 40 years or older
        • Pregnant or pregnant related medical condition
        • Handicap or Disabled
        • Suffered on the job injury
        • Filed worker’s compensation claim
        • Testified concerning another’s employee’s claim
        • Made complaint against sexual or racial harassment
        • Made complaint about workplace safety or possible illegal conduct by the employer 
      • Overall Concerns: 
        • Ensure your termination procedure assures that the employee’s treatment of the terminated employee is fair, when objectively examined. 
        • You should verify that the reason proffered for discharge is objectively justifiable as legitimate to the operation of the business. 

Forum Selection clause and Choice of law clauses held invalid

Verdugo v. Alliantgroup (CA4/3 G049139 5/28/15) 

 I am sure there are plenty of you who draft your own contracts and when able slip in a choice of law clause (usually  to enforce the law where the Project sits or where your business is located) and a forum selection clause( typically where the project is located or where your home office is located).  A recent California decision makes the enforcement of these provisions questionable. 

In a case decided in May 2015, entitled Verdugo v. Alliantgroup, both types of clauses were held to be unenforceable in the context of a wage and hour claim.

Plaintiff and appellant Rachel Verdugo appealed from an order granting a motion to stay her wage and hour lawsuit based on a forum selection clause in her employment agreement with defendant and respondent Alliantgroup, L.P. (Alliantgroup).  The clause designates Harris County, Texas, as the exclusive forum for any disputes arising out of Verdugo’s employment, and also includes a provision designating Texas law as governing all disputes.  Verdugo contended the trial court erred because enforcing the forum selection clause and related choice-of-law clause violates California’s public policy on employee compensation.  The Court of Appeal agreed and reversed the trial court’s order.

Although a party opposing enforcement of a forum selection clause ordinarily bears the burden to show enforcement would be unreasonable or unfair, the burden is reversed when the underlying claims are based on statutory rights the Legislature has declared to be unwaivable.  In that instance, the party seeking to enforce the forum selection clause has the burden to show enforcement would not diminish unwaivable California statutory rights, otherwise a forum selection clause could be used to force a plaintiff to litigate in another forum that may not apply California law.

 The Court found that Verdugo based all her claims on California Labor Code provisions that not only establish when and how employers must pay overtime and other forms of compensation, provide meal and rest breaks, and provide accurate wage statements to all California employees, but also establish specific remedies for an employer’s violation of these provisions, including recovery of unpaid wages, interest, civil penalties, and attorney fees.  California's Labor Code, in order to protect these important rights and remedies, declares they cannot be waived by agreement. 

The Court found that Alliantgroup failed to show enforcing the forum selection clause and related choice-of-law clause in Verdugo’s employment agreement would not diminish her statutory rights by requiring her to litigate her claims in Texas under Texas law.  Alliantgroup contended Verdugo’s statutory rights would not be affected by enforcing the forum selection clause because a Texas court “most likely” would reject the parties’ choice-of-law clause and apply California law.  Alliantgroup’s supposition about what a Texas court is likely to do is not sufficient to meet its burden because Alliantgroup’s arguments on appeal suggest it will argue against applying California law if this case is litigated in Texas, and Alliantgroup has not cited any authority that convinces us a Texas court necessarily will apply California law.

The Court noted that the few cases Alliantgroup cited did not address how a Texas court will view a choice-of-law clause in the context of a wage and hour dispute between a Texas employer and a California employee, and Alliantgroup failed to address the competing policies of these two states.  The Court found that Alliantgroup could have eliminated any doubt about which law would apply to Verdugo’s claims by stipulating to have the Texas courts apply California law, but failed to do so.  Instead, Alliantgroup carefully phrased its arguments in terms of vague possibilities while simultaneously seeking to minimize the significance of the California statutory rights on which Verdugo bases her claims.  Alliantgroup therefore failed to establish Verdugo’s unwaivable California's statutory rights would not be diminished.

The message of this case is clear.  Employers will not be able to use either of these clauses to try and minimize rights that California has deemed unwaivable.  Rather than try and avoid claims based upon legal grounds not recognized by California for a claim arising under California law, it is better to have your employee documents code compliant and properly maintained.  This will allow you a much better chance of prevailing than using choice of law or forum selection clauses.

If you need assistance in making sure your employee manuals, employment agreements etc. are California code complaint or simply wish to update them, please contact us and we can arrange to have that service performed for you by one of our labor and employment attorneys.

INABILITY TO WORK UNDER PARTICULAR SUPERVISOR NOT FEHA DISABILITY CLAIM

Higgins-Williams v. Sutter Medical Foundation (CA3 C073677 5/26/15) 

I am almost positive that every employer has come across this type of issue before.  You have an employee who for whatever reasons, cannot or will not work with his or her supervisor.  This case at least makes it clear that if someone files a disability claim on this basis, the claim is without merit. 

In this action for disability discrimination and wrongful termination, the court affirmed a summary judgment in favor of the defendant employer.  The Court did so largely because the plaintiff employee’s alleged disability—an inability to work under a particular supervisor because of anxiety and stress related to the supervisor’s standard oversight of job performance—is not a disability recognized in California’s Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.). 

A&A HIRES TWO NEW EXCEPTIONAL ATTORNEYS

Andrade & Associates is proud to announce the hiring of two new exceptional attorneys who will expand the services offered our clients beyond Construction, Labor law, and business litigation.  We are proud to announce two new additions to our team, Adam S. Hamburg and Reza Ghaboosi.

Mr. Hamburg specializes, along with Construction Law, Banking & Finance Litigation, Mortgage Banking, Corporate & Business Litigation, Real Estate Litigation, Employment Litigation and Bankruptcy.

Mr. Ghaboosi specializes in addition to Construction Law, in Employment ligation including wage and hour litigation, Real Estate Litigation, Insurance Litigation, and  Business Litigation.

Mr. Hamburg has been handling complex litigation for over 9 years.  Mr. Ghabossi has been handling complex litigation for over 10 years.

What follows is a more detailed description of the backgrounds of Mr. Hamburg and Mr. Ghaboosi for your review.  If they or any other member of our firm can ever be of any assistance to you, please feel free to give us a call.  More often than not, what appear to be troublesome issues can be answered over the phone at no cost to you.  We do not charge for responding to issues that we possess enough background in that we can answer your question without the need for any research.  In those situations, you will be given the correct answer without charge or obligation.  We will hopefully be on your list of preferred attorneys for when you really need an attorney for providing this free service.

ADAM S. HAMBURG

 

Expertise

Mr. Hamburg is an experienced and respected litigator, having represented clients in a wide range of matters involving various complex legal issues. Mr. Hamburg’s practice focuses primarily on construction, banking & finance, corporate, and real estate litigation. During the course of his career, Mr. Hamburg has developed a reputation for vigorous and successful representation of his clients by achieving exceptional results at the trial level.

 Prior to joining Andrade & Associates, Mr. Hamburg was an associate at a prominent Orange County law firm where he represented various banks, mortgage lenders and other financial institutions in state, federal and bankruptcy litigation matters.

 Mr. Hamburg is admitted to practice in California state trial courts, the United States Court of Appeals for the Ninth Circuit, and every United States District Court located in California.

Bar Admissions

State of California, 2006

U.S. District Court Central District of California, 2006

U.S. District Court Northern District of California, 2006

U.S. District Court Southern District of California, 2006

U.S. District Court Eastern District of California, 2006

United States Court of Appeal for the Ninth District, 2007

 Education

 Western State University College of Law, Fullerton, California, J.D.

St. Lawrence University, Canton, New York, B.A.

 Professional Associations and Memberships

 California Bar Association, Business and Real Property Sections

Orange County Bar Association

Orange County Trial Lawyers Association

American Bar Association

REZA GHABOSSI

 EXPERTISE

 

 

 Mr. Ghaboosi is a seasoned litigator with over 10 years of experience in California State and Federal Courts.  Mr. Ghaboosi’s practice focuses primarily on civil litigation in the areas of construction, business, real estate, employment, and insurance.  Mr. Ghaboosi has successful represented a broad range of business and institutional clients, from pre-litigation through trial.

 Prior to joining Andrade & Associates, Mr .Ghaboosi worked for a prominent law firm in La Jolla where his responsibilities included acting as lead trial attorney.  Mr. Ghaboosi is very active in the Orange County legal community, and enjoys volunteering in various matters of public concern.

 Mr. Ghaboosi is admitted to practice in all California state trial courts and every regional United States District Court in California.

 EDUCATION

  • Loyola Law School - Los Angeles, J.D. 2005
  • University of Colorado at Boulder, B.A. 1998

 BAR ADMISSIONS

  • California, 2005
  • U.S. District Court Southern District of California, 2008
  • U.S. District Court Central District of California, 2015
  • U.S. Bankruptcy Court Southern District of California, 2008
  • U.S. Bankruptcy Court Central District of California, 2015

 PROFESSIONAL ASSOCIATIONS

[None currently, but formerly Orange County Bar Association; American Bar Association, San Diego Bar Association; Real Estate section of San Diego Bar Association; Business section of San Diego Bar Association]

Press Release- Professional of the year 2015 Construction & Labor Law

Worldwide Who's Who Press release For Immediate Release  July 22, 2015

Richard B. Andrade Combines Legal and Practical Experiences

Mr. Andrade represents clients in the construction industry

LAGUNA HILLS, CA, July 22, 2015, Andrade & Associates Senior Partner, President and Owner Richard “Rick” B. Andrade has been recognized for showing dedication, leadership and excellence in business and civil litigation.

Based in Southern California, Mr. Andrade helps clients meet their business goals while protecting their legal rights. His practice areas focus mostly on private and public construction litigation. Cases have involved general business litigation, site condition claims, stop notice litigation and mechanic’s lien.

Mr. Andrade has 25 years of experience in construction litigation. On a day-to-day basis, he represents general contractors, subcontractors, material suppliers and project owners. Voted as one of Southern California’s top lawyers, Mr. Andrade demonstrates extensive experience in the California Judicial System as well as the federal court system. Because of his previous experience as a business owner in the construction industry, he is able to combine his contractor experience with his legal work.

A member of the State Bar of California, Mr. Andrade attributes his success to his business background. In looking back, he became involved in his profession after earning his bachelor’s degree in computer science. At first, he started working in computer science only to discover that he did not enjoy it. He later pursued a law degree after taking the LSAT with a friend and receiving high scores.

Mr. Andrade received his JD from California Western School of Law, cum laude. He also received a bachelor’s degree in business computer science from San Diego State University. He was recently inducted into Worldwide Registry and also maintains affiliations with the Engineering Contractors Association, the Associated General Contractors of California, the Southern California Contractors Association, the American Trial Lawyers Association, and the construction and labor law section of the American Bar Association.

SUMMARY FOR ENFORCING CLAIMS ON PRIVATE & PUBLIC WORKS PROJECTS IN CALIFORNIA

For those of you involved in the construction industry who are constantly trying to remember how to perfect your jobs rights in order to ensure payment, I have put together a short summary (Hundreds of pages condensed to 27 pages) that will answer approximately 90% of your everyday questions concerning protecting your rights.  For the other 10%, you might have to seek legal help.  In that case I would ask that you keep me in mind.  Just a note, the summary looks a bit odd on this post.  If you print it out it should be in the right format.  If not, send me a note and an e-mail address and I will send you one properly formatted.  In the past I have been told that this summary is very useful.

Short Summary for Enforcing Claims on Private and Public Jobs  . . . . . . . . . . . . .  1

 Procedural Steps for Enforcing Mechanic's Liens, Stop Notices and

Bond Rights on Private Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .  3

 Procedural Steps for Enforcing Bond and Stop Notice Rights

on State Public Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    14

 Procedural Steps To Enforce Claim On Miller Act Bond . . . . . . . . . . . . . . . . . .    20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT SUMMARY FOR ENFORCING CLAIMS

ON PRIVATE AND PUBLIC JOBS

 

 

MECHANICS' LIEN (PRIVATE WORK)

 

  1. Preliminary Notice must be sent to owner, contractor and lender within 20 days after first delivery.

 

  1. Notice of Intent lien must be mailed to owner, contractor and lender via certified mail.

 

  1. Record lien in county recorder's office within 30 days of notice of completion or 90 days of completion if no notice of completion.

 

  1. Bring, suit to foreclose lien within 90 days of recording.

                       

NOTE:  Effective 7/1/2013-Claimant must serve the owner with the Mechanic’s Lien prior to  recording the lien and must record Lis Pendens within 20 days of filing the law suit.

 

STOP NOTICE (PRIVATE WORK)

 

  1. Same as #1 under Mechanic's Lien.

 

  1. Serve bonded Stop Notice on lender within same times as set forth in above.

 

  1. Bring suit on Stop Notice no sooner than 10 days after service and no later than 90 days after lien period expires.

 

BOND (PRIVATE WORK)

 

  1. Record lien or give notice to surety within lien period.

 

  1. Bring suit on Bond within 6 months of completion.

 

 

STOP NOTICE (PUBLIC WORK)

 

  1. Serve 20 days notice on prime and public body within 20 days of first delivery.

 

  1. Serve Stop Notice on public body within 30 days of notice of completion.

 

  1. Bring suit on Stop Notice within 90 days from expiration of Stop Notice filing period.

Stop Notice filing period - Notice of Completion + 30 days = 60 days.

                        Time to bring suit within 90 days of end of Stop Notice Filing = 60 + 90 = 150 days.

 

BOND (PUBLIC WORK)

 

  1. Serve Notice to Surety on prime and bonding company within 15 days of completion, if Notice of Completion filed, or 75 days after actual completion (if no Notice of Completion filed).

 

  1. Bring suit within 6 months after expiration of time to file Stop Notice (6 months + 30 days after filing of Notice of Completion).

 

MILLER ACT (FEDERAL PUBLIC JOBS)

 

  1. Serve 90 day Bond Notice on prime within 90 days of last delivery.

 

  1. Bring suit within 1 year after last delivery.

 

PROCEDURAL STEPS FOR ENFORCING MECHANIC'S LIENS,

STOP NOTICES AND BOND RIGHTS ON PRIVATE JOBS

 

            CHECKLIST

 

  1. MECHANIC’S LIEN

 

  1. 20-DAY NOTICE (CC §8200-8034)

 

  1. When Given:

 

Must be given within 20 days after claimant first furnishes labor, services, equipment or material to the job site (CC §8102-8202).  Claimant may also give notice at any time during the job, in which case he will be entitled to file a lien or stop notice for labor, services, equipment or materials furnished 20 days prior to the notice and at any time after the notice.  (CC §8204).

 

  1. By Whom Given:

 

All persons claiming a lien or stop notice except the prime contractor and wage claimants (persons performing labor for wages) must give the notice. (CC §8200)

 

  1. To Whom Given:

 

Everyone, except a subcontractor dealing with an owner-builder, must give the notice to:

 

  1. Owner or reputed owner;
  2. Original contractor or reputed contractor, and
  3. Construction lender or reputed construction lender (CC §8200).

 

A subcontractor, material supplier or anyone dealing directly with an owner/builder when there is no prime contractor must give the notice to the construction lender or reputed construction lender. (CC §8200).

 

  1. Where Given:

 

The notice may be served at one of the following locations of the person to be served if that person resides in California:

 

  1. Residence;
  2. Place of Business;
  3. Address shown on building permit; or
  4. Address shown on construction trust deed. (CC §8116)

 

If the person to be notified resides outside California, service can be made in the same manner as for a person residing in California, but if the person cannot be so served, then the notice can be addressed to the construction lender or the original contractor.  (CC §8116)

 

NOTE:   Statute provides that the contract between the owner and original contractor shall provide space for the name and address of the owner and construction lender and that the original contractor shall make that information available to any person seeking to serve a preliminary notice. (CC §8170 and CC §8208)

 

  1. How Given:

 

  1. Personal Service;
  2. Registered mail; or
  3. Certified mail.

 

NOTE:   When the notice is sent by registered or certified mail, service is complete when mailed. Therefore, this method of service is recommended. (CC §8116)

 

  1. Contents of the Notice:

 

  1. A general description of the labor, services, equipment or materials furnished.

 

  1. If there is a construction lender he must be furnished with an estimate of the total price of the labor, services, equipment or materials.

 

  1. The name and address of the person giving the notice.

 

  1. The name of the person who contracted for purchase of the labor, services, equipment or materials.

 

 

  1. A description of the job site sufficient to identify it.

 

  1. The following notice in boldface type:

 

                                                NOTICE TO PROPERTY OWNER

 

If bills are not paid in full for the labor, services, equipment or materials furnished or to be furnished, a mechanic's lien leading to the loss, through court foreclosure proceedings, of all or part of your property being so improved may be placed against the property even though you have paid your contractor in full.  You may wish to protect yourself against this consequence by (1) requiring your contractor to furnish a signed release by the person or firm giving you this notice before making payment to your contractor or (2) any other method or device which is appropriate under the circumstances.

 

  1. If the notice is given by a subcontractor who, under a collective bargaining agreement. is required to pay supplemental fringe benefits into an express trust fund, then the notice must identify and give the address of the trust fund. (CC §8102 and CC §8202).

 

 

NOTE:  The statute provides that, if an invoice contains the required information, it may be sent as a notice under the statute. (CC §8102 and CC §8202).  The author has never seen an invoice that contained all of the above information.

 

NOTE:  An architect, registered engineer or licensed land surveyor who has furnished design services for the work of improvement may give his notice within 20 days after the work of improvement has commenced. (CC §8102 and CC §8202).

 

  1. How Many Given:

 

Only one notice need be given for each job on which the claimant has furnished labor, services, equipment or materials, unless he contracts with more than one subcontractor.  In that case he must give a notice for each subcontractor. (CC §8206).

 

Additionally, if the value of work performed exceeds the estimated value in Notice, an additional Notice should be served containing the estimated value of the additional work (total amount of Contract)

 

  1. Proof of Service of Preliminary Notice:

 

  1. If served by mail, then by proof of service affidavit accompanied by the return receipt of certified or registered mail or a photocopy of the record of delivery and receipt maintained by the post office showing, the date of delivery and to whom delivered or, in the event of non­delivery, the return envelope itself.

 

 

  1. If served personally, then by proof of service affidavit.

 

  1. The "proof of service affidavit" is an affidavit of the person making service showing:

 

  • Time of service;
  • Place of service;
  • Manner of service;
  • Fact showing service was made in accordance with CC §3097, §8200 and §8034; and
  • Name and address of person served and title and capacity in which he was served, if appropriate. (CC §8118).

 

  1. Disciplinary Action:

 

If a licensed contractor has a contract to supply more than $400 worth of labor, services, equipment or materials, then failure to give notice is a ground for disciplinary action. (CC §8216).  Failure of the subcontractor to include the name and address of trust funds he contributes to that, results in the filing of a lien or stop notice also constitutes grounds for disciplinary action if the amount due the trust fund is not paid. (CC §8216).  Finally, if a contractor or subcontractor is delinquent in paying fringe benefits, be must so notify the construction lender or reputed construction lender, setting forth the name of the owner and contractor. A description of the job site sufficient for identification.  The identity and address of the trust fund the total straight time and overtime hours that are delinquent on each job and the amount then past due and owing.  If the construction lender is not so notified within five days of the date payment was due, this will also constitute grounds for disciplinary action.   (CC §8104).

 

  1. A copy of the preliminary notice may be filed with the county recorder. There is a fee for filing that varies from county to county.  If the preliminary notice is filed with the county recorder, then the county recorder will mail to the claimant a notification that a notice of completion or a notice of cessation has been recorded.  Failure of the recorder to comply with this requirement shall not affect the time for filing a lien.

 

  1. RECORDING THE LIEN

 

  1. A general contractor cannot record a lien until he completes his contract. (CC §8412). All others cannot record their liens until they have ceased furnishing labor, services, equipment or materials. (CC §8414).

 

  1. Service of Affidavit on Owner:

 

A lien claimant must serve the Owner and must list the address at which a copy was served on Owner (CC §8416) prior to recording his lien.

 

 

  1. Notice of Completion:

 

  1. Where a valid notice of completion has been recorded, the general contractor then has 60 days to record. All others have 30 days. (CC §8412-8414).

 

  1. No Notice of Completion, But Actual Completion:

 

  1. All persons have 90 days from actual completion to record.

(CC §8412-8414).

 

  1. If there is no notice of completion and no actual completion of the job, the following are deemed equivalents of completion and all persons have 90 days from the following events to record their liens:
    1. Occupation and use of the work of improvement by the owner or his agent accompanied by a cessation of labor. (CC §9200 and CC §8180).

 

  1. Acceptance of the work of improvement by the owner or his agent. (CC §9200 and CC §8180).

 

  1. A cessation of labor for a continuous period of 60 days. (CC §9200 and CC §8180).

 

  1. Notice of Cessation of Labor:

 

  1. If the owner records a notice of cessation of labor (after a 30-day cessation) then this is the same as a notice of completion and the prime contractor has 60 days, and all others have 30 days, to record their liens. (CC §9200, 9202, 7412-8414, 8180 and 8188).

 

  1. Where recorded:

 

In the office of the county recorder where the real property is located.

 

  1. If the work of improvement is made pursuant to two or more original contracts, each covering a particular portion of the work of improvement, then the owner may record a separate notice of completion within 1O days after the completion of each separate contract. The lien period is then the same as set forth above. (CC §8186).

 

  1. Contents of Mechanic's Lien (CC §8416):

 

  1. A statement of claimant's demand, after deducting, all just credits and offsets.

 

  1. Name of owner or reputed owner, if known.

 

  1. A general statement of the kind of labor, services, equipment or materials furnished.

 

  1. A description of the job site sufficient for identification.

 

  1. Value of Lien can be either the reasonable value of the work or the price agreed to by the Claimant and the party contracted with.

 

 

NOTE:   The lien must be signed and verified by the claimant or his agent. It need not be acknowledged.

 

NOTE:  Effective 7/1/2014, Claimant must also serve the lender and Owner with a copy of the Mechanic’s Lien prior to the time that it is recorded.

 

  1. Suit:

 

  1. Must be commenced within 90 days after the lien is recorded in the county where the real property is located. (CC §8460). The time to sue may be extended for up to one year from completion, provided a proper extension of time to foreclose is recorded within 90 days of recording the lien. (CC §8460).

 

  1. The suit should name as defendants all parties who have any interest in the property. Suggested sources of names:  lot book report, mechanic's lien guaranty or preliminary title report.

 

  1. The court may exercise discretionary dismissal if the suit is not brought to trial within two years. (CC §8462).

 

  1. Lis pendens must be recorded within 20 days of filing the lawsuit. (CC §8461).

 

  1. Mechanic's lien actions on the same property may be consolidated.

 

  1. Plaintiff can get an attachment in a lien foreclosure action.

(CC §8468).

 

 

 

  1. STOP NOTICE

 

  1. In general, everything said about mechanic's liens on preliminary notice requirements and the time for filing applies to stop notices. (CC §8502 and 9100)

 

  1. Anyone entitled to a mechanic's lien is also entitled to file a stop notice.

(CC §8508-8530).

 

  1. The stop notice is served on the owner, construction lender or any other person holding construction funds. (CC §8044, 8502, 8506, 9352, and 9354).

 

  1. If a payment bond has been recorded, then withholding by the owner or construction lender pursuant to the stop notice becomes optional as to all claimants except the prime contractor who furnished the payment bond. (CC §8522-8536, 8538, and 8542). If the claimant sends a written request and a self-addressed envelope with the stop notice to the owner and/or construction lender, then the owner and/or construction lender must notify the claimant of the election not to withhold and send a copy of the payment bond.

 

  1. In order to make withholding of funds mandatory by the construction lender, the stop notice must be bonded 1-1/4 times the amount of the claim. (CC §8532).

 

  1. Service of Stop Notice (CC §8506 and 8532):

 

  1. Personal service,

 

  1. Registered mail, or

 

  1. Certified mail.

 

 

NOTE:  The stop notice must be served on the manager or other responsible officer or person at the office of the construction lender at the branch where the construction funds are being administered. (CC §8506 and 8532).  If the job involves use of a joint control agency, a stop notice should be filed there as well, because there will be funds at both locations.

 

  1. Contents of a Stop Notice (CC §8506) :

 

  1. Signed and verified by claimant or his agent;

 

  1. Kind of labor. services, equipment or materials furnished;

 

  1. Name of person to whom labor, services, equipment or materials furnished;

 

  1. Amount already furnished and the total amount agreed to be furnished. (CC §8502).

 

  1. The name and address of the claimant. If the claimant wants notice of election not to withhold by the owner and/or construction lender because of a payment bond, then the claimant must request the notice of election in writing and provide a self-addressed stamped envelope.

 

  1. Suit:

 

  1. May not be filed within the first 10 days after service, but must be filed no later than 90 days after expiration of the stop notice filing period. (CC §8550 and 9582).

 

  1. Notice of suit must be given within 5 days after commencement. (CC §8550(e) and 9504).

 

  1. Cannot be brought to trial until 90 days after the lien period expires. (CC §8550(c) and 9500).

 

  1. The court may exercise discretionary dismissal if the suit is not brought to trial within 2 years. (CC §8554).

 

  1. Stop notice suits may be consolidated, and the owner and lender may compel claimants to implead in one action. (CC §8552).

 

  • PAYMENT (LABOR AND MATERIAL) BONDS

 

  1. If the original contract is filed with the county recorder and a payment bond in an amount not less than 50% of the contract price is recorded before a work of improvement is commenced, the court must, when it would be equitable to do so, restrict recovery on mechanic's liens to the amount found due from the owner to the contractor and render judgment against the surety for the deficiency. The intent of the law is to limit the owner's liability to his contract price (CC 8600-8602).

 

  1. Preliminary Notice:

 

  1. In order to recover on a payment bond, the claimant must have either recorded a lien or served the surety with written notice within the lien period. (CC §8612 and 8614). The notice must state the kind of labor, services, equipment or materials furnished, the name of the person to whom the labor, services, equipment or materials were furnished and the amount already furnished and the whole amount agreed to be furnished. (CC §8200).  This notice may be served on the surety by personal service or certified or registered mail. (CC §8200).

 

  1. Suit:

 

  1. Must be brought within six months after completion of the work of improvement. (CC §8610).

 

 

 

PROCEDURAL STEPS FOR ENFORCING BOND

AND

STOP NOTICE RIGHTS ON STATE PUBLIC WORKS

 

 

  1. STOP NOTICE

 

  1. 20 DAY NOTICE (CC §8034 and 9300)

 

  1. Who Gives:

 

All persons who do not have a contractual relationship with the prime contractor except a person who performed actual labor for wages or an express trust fund described in (CC §9100).

 

  1. When Given:

 

Within 20 days after the claimant has first furnished labor, services, equipment or material to the jobsite. (CC §9300, 9302, 9303, 9304).

 

NOTE:  If a claimant fails to give notice as required by (CC § 9300), a claimant may still give the required notice at any time thereafter.  However, the claimant shall be entitled to assert a claim against a payment bond and file a stop notice only for labor, service, equipment or material furnished within 20 days prior to the service of the preliminary notice, and at any time thereafter.

 

  1. To Whom Given:

 

Contractor and public agency. (CC §9300, 9302, 9303, 9304).

 

  1. How Given:

 

First-class mail, registered mail or certified mail, or personal service.  (CC §9300(a).  This also is different than private works where first-class mail is not allowed.

 

  1. Where Given:

 

To the contractor at any place he maintains an office or conducts his business, or his residence.  In case of any public works constructed by the Department of Public Works or the Department of General Services of the state, send to the office of the disbursing officer of the department constructing the work. (CC §9300, 9302, 9303, 9304).

 

  1. When Service is Complete:

 

If service by personal service, then at the time of service.  If service by registered or certified mail, then service complete at time of deposit of mail.  Code is silent as to when service complete if by first-class mail, but can be inferred that service not complete until receipt by contractor and public body.  Therefore, recommend service by registered or certified mail. (CC §9300, 9302, 9303, 9304).

 

  1. Contents of Notice:

 

General description of labor, service, equipment or materials furnished or to be furnished and the name of the party to whom the same was furnished. (CC §9300, 9302, 9303, 9304).

 

  1. Disciplinary Action:

 

Where the contract price to be paid any subcontractor exceeds $400.00 the failure to give the notice constitutes grounds for disciplinary action.       (CC §9306).

 

 

  1. FILING THE STOP NOTICE

 

  1. Contents:

 

Written notice signed and verified by the claimant stating:

 

  1. The kind of labor, service, equipment or materials furnished or agreed to be furnished by the claimant.

 

  1. The name of the person to or for whom the same was done or furnished.

 

  1. The amount in value, as near as may be, of that already done or furnished and of the whole agreed to be done or furnished. (CC §8044, 8502, 8506, 9352, and 9354).

 

  1. The name and address of the claimant.

 

Although the statute does not require it, most stop notice forms also contain the amount paid and the balance due and the date from which interest is claimed.

 

  1. Who May Serve Stop Notice:
  1. Except as provided in subdivision (b), any of the following persons that have not been paid in full may give a stop payment notice to the public entity or assert a claim against a payment bond:

 

  1. A person that provides work for a public works contract, if the work is authorized by a direct contractor, subcontractor, architect, project manager, or other person having charge of all or part of the public works contract.

 

  1. A laborer.

 

  1. A person described in Section 4107.7 of the Public Contract Code.

 

  1. A direct contractor may not give a stop payment notice or assert a claim against a payment bond under this title. (CC §9100)

 

 

 

  1. How Served: Personal service, registered mail or certified mail.            (CC §8044, 8502, 8506, 9352, and 9354).

 

  1. Upon Whom Served:

 

In the case of any public work for state, file with the director of the department which let the contract.  In the case of any other public work, then with the office of the controller, auditor or other public disbursing officer whose duty it is to make payments under the contract, or with the commissioners, managers provisions o trustees, officers, board of supervisors, board of trustees, common council or other body by whom the contract was awarded. (CC §8044, 8502, 8506, 9352, and 9354).

 

 

 

  1. Time For Service:

 

A stop payment notice is not effective unless given before the expiration of whichever of the following time periods is applicable:

 

  1. If a notice of completion, acceptance, or cessation is recorded, 30 days after recordation.

 

  1. If a notice of completion, acceptance, or cessation is not recorded, 90 days after cessation or completion (CC §9356).

 

  1. SUIT

 

In order to finally perfect a stop notice, a suit must be brought.  Suit on the stop notice is brought no sooner than 10 days after its service and no later than 90 days after the expiration of the time for filing stop notices. (CC §9502).  Notice of suit must be given to the public body within five days after commencement. (CC §9504).  Court has discretionary right to dismiss if not brought to trial within two years. (CC §9508).  Claimants may join in one section.  Separate stop notice suits may be consolidated.  The public body may require interpleader. (CC §9506).

 

  1. LABOR AND MATERIAL BOND

 

  1. NOTICE TO PRINCIPAL AND SURETY (CC §9560)

 

  1. Who Gives:

 

All claimants except laborers, trust funds and claimants with a direct contractual relationship with the original contractor. (CC §8034 and 9300).

 

  1. When Given:

 

Within 15 days after recordation of a Notice of Completion or if no Notice of Completion filed, within 75 days after completion of the project.  (CC §9560)

 

  1. To Whom Given:

 

To the Surety and General Contractor. (CC §9560 and 9562)

 

  1. How Given:

 

Personal service or registered or certified mail. (CC §9562).  Note: No first-class mail is allowed as is the case with regard to the 20 day notice relating to stop notices.

 

  1. Where Given:

 

Where surety or general contractor maintains an office or conducts business or at his place of residence. (CC §9560).

 

  1. Contents:

 

The name of the claimant, the kind of labor, services, equipment or material furnished by the claimants, the amount claimed due, and the name of the person to or for whom the labor, services, equipment or material were furnished.  (CC §9560, 8614, and 9562)

 

  1. SUIT

 

In order to perfect the claim on the labor and material bond, the claimant must file suit after claimant has furnished last labor and material and no later than six months after period for filing stop notices expires. (CC §9558).

 

 

 

On Federal Public Works Projects, the sole source of recovery for an unpaid Subcontractor or supplier is the Bond mandadted by the Miller Act.

 

PROCEDURAL STEPS TO ENFORCE CLAIM

ON MILLER ACT BOND

40 USC §3131-3134

 

            There are two procedural steps to enforcing a claim under the Miller Act Bond.

 

  1. Preliminary Notice.
  2. Suit on the bond.

 

If the claimant does not have a direct contractual relationship with the prime contractor, then the claimant must, as a condition precedent to his right to sue on the bond, send a notice in writing to the prime contractor by registered mail within 90 days after the claimant last furnished labor or material to the job (40 USC §3133(b)(2)).  Conversely, if you have a direct contractual relationship with the prime contractor, then no preliminary notice is necessary.

 

If you are not paid, then suit on the Miller Act bond must be brought in the U.S. Federal District Court where the job is located within one year after your last furnishing of labor and material(40 USC §3133(b)(1)).

 

U.S.C. 27O8 (b).

 

It is clear under the cases interpreting the Miller Act, that if you are beyond the Third Tier on the job you cannot recover under the Miller Act.  Clifford F. MacEvoy Co. v. U.S. ex. rel.  Calvin Tomfine Co. (1944) 322 U.S. 102)

 

Example:

 

Prime Contractor

 

 

 

First Tier

Subcontractor

 

 

 

Second Tier

Subcontractor

 

Material Supplier

 

Third Tier (covered)

Subcontractor or

Material Supplier

 

 

 

Fourth Tier (cannot recover)

 

 

If you are relying on the Miller Act bond in extending credit on a federal construction project, then you must take care that your customer is either the prime contractor or is a person with a contractual relationship with the prime contractor.

 

 

In summary:

 

  1. The Miller Act applies to federal construction projects.

 

  1. If you do not have a direct contractual relationship with the prime contractor, you must give written notice of your claim by registered mail to the prime contractor within 90 days of your last furnishing of labor or material to the job.

 

  1. Suit on the bond must be brought in federal court within one year after last furnishing of labor or material.